Japan’s leading refiner Nippon Oil Corp. and sixth-ranked Nippon Mining Holdings Inc., faced with sluggish domestic demand for gasoline, plan to merge into a holding company.
Meanwhile, Nippon Oil Exploration is talking with Iraq about $10-20 billion worth of investments that are to include exploration and construction of a 300,000 b/d refinery.
In other recent company news:
- BG Group PLC and BP PLC plan to swap interests in each other’s assets in the UK North Sea in a transaction worth £300 million.
- Chaparral Energy Inc. has called off a merger agreement between its subsidiary, Chaparral Exploration LLC, and Edge Petroleum Corp.
Nippon Oil, Nippon Mining
Nippon Oil and Nippon Mining expect the merger to be completed in October 2009.
Based on combined projected group sales for fiscal 2008, the new company will have sales of ¥13.15 trillion/year, surpassing China National Petroleum Corp.
Nippon Oil and Nippon Mining plan to reorganize so that the resulting holding company will have subsidiaries in refining and marketing, field development, and metals.
Nippon Oil Pres. Shinji Nishio emphasize refining, saying: “The new firm will reduce refining capacity by 400,000 bbl, or 20% of the companies’ combined capacity, within 2 years.”
After the integration, the company is expected to consolidate its 10 existing refineries and domestic network of about 13,000 gas stations, aiming to boost profitability by eliminating excess capacity.
Nippon Oil has a 23.1% share of Japan’s gasoline market, with Nippon Mining Holdings unit Japan Energy Corp. commanding 10.3%. The new holding company will hold 33.4%.
Nippon Oil and Iraq
Nippon Oil Exploration is in discussions with Iraq about exploration and refining investments in Iraq.
Ryunosuke Onogi, an executive and general manager at Nippon Oil’s subsidiary NOE, said the proposed refinery would cost $5-10 billion.
He estimates the same amount going toward exploration.
In November, Iraq approved construction of two refineries, scheduled to have total capacity of 300,000 b/d. Previously, Iraq approved two other new refineries, together totaling 450,000 b/d.
Iraqi Oil Minister Hussan Al-Shahrastani said Iraq needs help from outside companies to stem the decline in oil production and to help develop new fields.
Al-Shahrastani said the next 2 years will be crucial to rebuild the oil sector, with the government hoping to increase production to 4.5 million b/d by 2013 and to 6 million b/d by 2018 from the current 2.4 million b/d.
The discussion between NOE and Baghdad follows efforts by Turkey’s state-owned Turkish Petroleum Corp. to form a consortium with Japanese firms to bid for contracts to develop Iraqi oil fields. TPAO Chairman Mehmet Uysal met in October with Mitsubishi Corp., Inpex Corp., Nippon Oil, and Japan Petroleum Exploration Co., as well as government officials.
At the time, Uysal urged major Japanese companies, including Nippon Oil and Mitsubishi, to jointly develop the oil reserves of Iraq’s Kurdish region.
Uysal’s approach came after the Iraqi government presented details of six major oil fields and two big gas fields in Iraq to 35 international oil companies, among them Inpex, Japex, Mitsubishi, and Nippon Oil.
TPAO was not among the companies invited to the Iraqi government’s licensing round presentation in London. As a result, TPAO is looking to enter Iraq via a partnership with one or more Japanese firms ahead of the bidding.
BG, BP swap UK N. Sea stakes
BG will gain BP’s equity stake in Everest, Lomond, and Armada fields and part of BP’s equity in Erskine field, operated by Chevron.
All fields are in the Central North Sea. In return, BG will transfer all of its equity interests in fields in the Southern North Sea to BP.
BG’s interest in Everest, Lomond, and Armada fields will rise to 80% from 60% interest. BG will operate the fields.
BP, in exchange, will acquire BG’s interests in the Southern North Sea for the Easington Catchment Area (ECA) fields (Apollo, Artemis, Mercury, Minerva, and Neptune, which are BG-operated; and Wollaston and Whittle fields), and Amethyst field, which are BP-operated.
“Completion of the exchange is expected towards the middle of next year, subject to regulatory and third-party approvals,” BG said.
Chaparral calls merger off
Chaparral, Oklahoma City, had planned to acquire Edge Petroleum of Houston and become a public company.
Chaparral and Edge agreed to terminate the merger following their conclusion that there was no reasonable expectation all closing conditions could be met by Dec. 31.
